European Union proposes reforms to emissions trading system to support industry and enhance competitiveness
Brussels, July 17 (KUNA) -- The European Commission proposed on Friday reforms to the European Union’s carbon emissions trading system to alleviate burdens on industrial companies and enhance their competitiveness amid economic and geopolitical repercussions, particularly rising energy prices.
In a statement, European Commission President Ursula von der Leyen said, “The best way to reduce Europe’s dependence on fossil fuels is to rely on locally produced clean electricity,” adding that the Commission proposes making Europe the “first continent powered by electricity” by lowering electricity prices and adapting the carbon market to global changes, while maintaining the path toward a clean economy and supporting decarbonization of the industrial sector.
She emphasized that the plan represents an “investment in European autonomy” by reducing reliance on fossil fuel imports, strengthening energy security, and boosting industrial competitiveness.
The Commission noted that Europe remains heavily dependent on fossil fuel imports, leaving it vulnerable to geopolitical shocks that have driven up energy prices for households and businesses and eroded competitiveness.
The plan aims to raise the share of electricity in final energy consumption to 46 percent by 2040, up from around 23 percent currently, which could help reduce the annual fossil fuel import bill by approximately 260 billion euros ($297.06 billion) by that year.
Regarding reforms to the emissions trading system, the Commission stated that the proposals would give companies greater flexibility during the industrial transition while maintaining the climate objectives set out in the European Climate Law.
Under the proposals, free emission allowances for companies would be extended until 2038 instead of 2034, provided they invest in decarbonization projects within Europe. Additionally, from 2036, companies would be allowed to use up to 2 percent of high-quality international carbon credits to contribute to emission reduction targets.
EU Climate Commissioner Wopke Hoekstra said the Commission is adopting a “more business-friendly and smarter approach” while preserving the EU’s climate ambitions.
The Commission explained that the reforms would provide over 100 billion euros ($114.26 billion) for decarbonization investments before 2030, through the Industrial Decarbonization Bank and the Innovation Fund, alongside requiring member states to allocate 50 percent of revenues from the emissions trading system to support decarbonization in covered sectors.
The Commission also proposed slowing the phase-out of free allowances for sectors subject to the Carbon Border Adjustment Mechanism (CBAM), extending them until 2038, and increasing free allowances for industry by 6.6 billion euros ($6.85 billion) during the 2026–2030 period.
In the aviation sector, the Commission proposed gradually expanding the system to cover flights under 5,000 kilometers outside Europe, bringing all private jet flights under the system, and progressively including the waste incineration sector in the carbon market, with possible exemptions for certain countries until 2035 under specific conditions. (End) A.R.N. / M.N.F.
